SPC might go better with Coke

Page Tools

Related

Australia's biggest soft drinks company, Coca-Cola Amatil, is
expected to re-enter the food market with a bid for SPC Ardmona,
valuing the tinned fruit business at almost $700 million.

Shares in Coca-Cola Amatil were suspended yesterday when it
released a statement to the market that it was considering an
unidentified transaction and that talks were continuing.

Shares in SPC Ardmona were suspended the day before, closing at
$1.78, as National Foods walked away from merger talks with the
company. However, SPC had already been talking to CCA for several
weeks.

New Zealand dairy co-operative Fonterra, which has a 19 per cent
stake in NatFoods and launched a bid for the rest of the company,
argued that fruit canning was outside NatFoods' core business and
its takeover would proceed only if merger talks between NatFoods
and SPC Ardmona were abandoned.

SPC Ardmona's managing director, Nigel Garrard, did not return
calls yesterday. CCA was just as coy, refusing to comment on the
speculation of a bid of $2.05 a share, which would have the drinks
company taking $480 million of equity in SPC Ardmona and assuming
$150-$200 million of debt.

The bid, expected today, will mark CCA's first foray into food
since it sold CCA Snackfoods, which included Smith's Crisps, in
1993. CCA sees SPC as the vehicle for consolidating its expansion
into the health and wellness market. It believes the company has
enormous potential for product innovation, developing such products
as fruit smoothies, drinking yoghurt and fruit and vegetable
juices.

It also sees scope for packaging innovation, putting the fruit
into plastic containers and then selling through CCA's vast
distribution network, which covers supermarkets, convenience stores
and petrol stations across the country.

Analysts and fund managers, however, could not see strategic
sense in the anticipated transaction. Worse still, they said CCA
had no management experience dealing with growers and agricultural
risk, and that it could distract its attention from sorting out its
problems in South Korea.

As a result, some expected CCA's share price would tumble below
$7. Before yesterday's halt of trade, CCA's price was $7.48.

ABN Amro's David Cooke said: "We need to be convinced of the
strategic rationale behind this acquisition at this point in time.
Prima facie, it suggests that CCA foresees a slowdown in the growth
profile of its existing operations and can no longer see strong
returns on internal growth or from other acquisitions."